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INDIA: A national rubber policy is long overdue
(Last Updated: 19 Apr 2017)

 

 

 

 A national rubber policy is long overdue

And must lay emphasis on interconnectedness, market integration and strategic commercial features

The constitution of an expert committee by the government to formulate a national rubber policy (NRP) deserves attention for two important reasons: the first ever attempt to draw a blueprint for the sustained growth of the rubber sector; and the serious challenges posed by growing imports of natural rubber (NR) and . The daunting task is contextualising the compulsions for an NRP in the backdrop of changes during the past two decades of trade policy reforms.

A distinguishing feature of India’s rubber sector since the mid-1930s had been a high degree of interconnectedness among the constituent segments due to specific historical, structural and regional factors. The interconnectedness rooted in the domestic market was nurtured for achieving self-sufficiency and import substitution in the post-Independence phase. The development of a captive domestic market and a protected policy regime ensuring stable and remunerative prices sustained the tempo of growth in NR production during 1947-91. Import intensity of NR consumption was less than 4 per cent at the time of trade policy reforms in 1991-92.

However, growing exposure to external competition through the multilateral and RTA routes during the past two decades left serious strains on the harmonious relationships prevailed in the rubber sector. Today, India is the fourth largest consumer of rubber behind , the US and . The estimated total value of output of India’s rubber products manufacturing industry was ₹7,03,079.5 million during 2012-13.The maturity achieved by the industry is also evident from the positive balance of trade achieved since the early 1970s.

Survival strategies

An important outcome of the trade policy reforms has been a steady increase in the imports of rubber and rubber products and the resultant survival strategies characterised by an explicit conflict among the constituent segments to maintain the margins. While the contentious issue of the adequate supply of NR at mutually acceptable prices had been masked by the protective trade policies during the pre-reforms phase, the current imbroglio led to a breakdown of the linkages within the rubber sector. The unprecedented surge in NR imports attracted wider attention due to its impacts on more than one million dependent households and the regional dimension. NR imports into the country grew at a rate of 23.07 per cent during 2004-05 to 2013-14.

The two explicit outcomes of growth in NR imports are: (i) an increase in the import intensity of domestic NR consumption to more than 36 per cent; and (ii) the gradual replacement of conventional sheet grades of NR from the domestic market by block rubber with important implications on the farm gate price. A major casualty of the convergence of the markets has been a fluctuating farm income leading to staggered replanting and the resultant growth in the share of area under senile trees to the extent of around 50 per cent in the total tapped area in the country during 2013-14. Alongside, the steady increase in the share of synthetic rubber (SR) in total domestic rubber consumption and expansion of its indigenous production capacity during the past one decade are bound to tilt the prevailing equations. The dominant automotive sector has also been undergoing important changes consequent to a higher annual rate of growth in the total value of imports (28.88%) than that of exports (17.21%) during the past one decade. The higher growth rate in rubber products imports are indicative of: (i) a widening domestic market; (ii) weaker links in the indigenous rubber products manufacturing industry; and (iii) a gradual displacement of the domestic rubber sector. This calls for paradigm shifts in policy approaches.

External trade

India’s rubber sector has been confronted with a negative balance of trade since 2007-08; in 2013-14 it was $751.04 million. Asean accounted for more than 70 per cent of India’s negative trade balance in rubber and rubber products over the past five years. Apparently, a persistent deficit supply of has been the Achilles heel in India’s external trade in rubber and rubber products since Independence. Hence, changes in the composition of the rubber products manufacturing industry, trends in the external trade, and the availability of all kinds of rubber from both internal and external sources are the critical factors for evolving a comprehensive policy framework.

A blueprint for an NRP must recognise three important elements of the rubber sector: (i) the interconnectedness; (ii) challenges of market integration; and (iii) strategic commercial importance of NR. An essential prerequisite for conceiving and implementing an NRP is the consolidation of existing organisational networks related to the rubber sector. The segmented policy approaches for raw materials, rubber products, external trade and export promotion measures will undermine a comprehensive understanding on the interconnectedness of the issues.

A regular mechanism for monitoring the trends in all the constituent segments by a centralised agency will certainly enable the addressing of the challenges of market integration more effectively. The primary objective of the proposed consolidation of the organisational networks is planning, control and technical support for reinforcing interconnectedness, and to ensure a sustainable growth path to the rubber sector.

The writer is the joint director of the Rubber Research Institute of India.

- The Hindu

 

 

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Kerala's rubber procurement plan fails, prices fall further

Large plantations halt production as heat hits latex making process

 

government's announcement in budget to procure to support prices is facing challenge as the price of bench mark grade RSS-4 dropped to Rs 117/ Kg today.

State had announced earlier to procure natural at Rs 150/Kg to support prices from falling. The procurement is yet to commence.

Kerala government has announced to procure 20,000 tones at a price tag of Rs 150/Kg. The latest budget has earmarked Rs 300 crore for the purpose, but procurement is yet to start.

This makes the market in real crisis as a section of traders had stocked rubber anticipating procurement. A dealer said that the summer shower is now a problem to them as fungus infection is likely in due course.

Earlier the government's announcement had created some hope in the market, but as global price drops on a daily basis, there is absolutely no takers for rubber in local market. The market is now on a dropping mode even in the midst of the off season.

Tapping has been stalled in most of the large plantations as production of latex is too low due to extreme summer heat. Small and Medium farmers are not tapping tress for the last one year.

Yet the market does not show a sign of improvement as overseas market are on a low price regime. Import is rather high during last couple of months as the overseas market is attractive to the rubber based industries, especially for the tyre makers.

Standard Malaysian Rubber (SMR) is available at a price tag of Rs 84-85 in Malaysia and rubber is pouring to the country, according to local traders.

They said that there is no demand for rubber in the local markets and tyre makers are also away from the market since last couple of weeks. All the steps taken by the state government failed miserably to enthuse the market.

Although the Union government is talking of raising the import duty from 20 to 25 per cent the formal decision is yet not taken. However now the way global prices are falling daily how far duty hike will provide support is also an issue, said one of the traders.

 

Local dealers are not able t stock rubber due to various uncertainties, growers are not getting even the market price as dealers are not ready to give the price announced by the Rubber Board. Benny Chacko, a grower said that they get a maximum of Rs 115/Kg.

 

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Rubber import to cross 400,000 tonnes

The import of natural rubber import has increased 42 per cent on a year-on-year (y-o-y) basis from 20,300 tonnes in February 2014 to 28,806 tonnes last month. The cumulative import for the -February period of FY15 crossed 380,000 tonnes, signalling annual import to cross 400,000 tonnes by March-end.

The total import of the commodity in the first 11 months of the current financial year was 388,683 tonnes, against 335,349 tonnes in the year-ago period, the latest figures from the show.

Experts expect rubber import to cross the 400,000-tonne mark in the current financial year. If happens, will be an all-time high escreplica.com.

Although there is strong pressure to enhance the import duty, rubber will pour into the country as the foreign market continues to be quite attractive.

While Union commerce minister Nirmala Sitharaman has said the Centre might increase the duty by five per cent to 25 per cent, increasing the duty is unlikely to curb imports because importing will still be cheaper thanks to the price difference.

For example, the global market price of block rubber (-20), which is mostly imported to , is Rs 87 a kg. Its landed after paying duty is Rs 110 a kg – which is still lower than the local price of Rs 135 a kg. Even if the duty is raised to 25 per cent, the landed will only be Rs 113-115 a kg.

Such a measure could only have a ‘psychological impact’ for a short period, said a leading rubber trader. Moreover, the price is set to fall in overseas markets, especially in Bangkok.

Meanwhile, production has also come down – from 57,800 tonnes in February 2014 to 50,000 tonnes last month, a y-o-y drop of 13.5 per cent.

While the monthly consumption increased 4 per cent at 82,500 tones. Total production in April -February period was 620,000 tones as against 726,300 tones, recording a fall of 14.6 per cent. Consumption increased 4 per cent to 928,865 tones as against 894,120 tones, leaving a shortfall of 308,865 tones in local production. This time annual production is likely to be below 700,000 tones.

- Business Standard

 

 

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‘We are all for a healthy rubber plantation sector’

V SAJEEV KUMAR

 
 
 
RAGHUPATI SINGHANIA
Chairman, ATMA
RAGHUPATI SINGHANIA Chairman, ATMA
 

 

 

Rubber growers and the tyre industry have been on a collision course over the slump in prices and on the move to impose import duties. Volatility in rubber prices, of late, has put the sector in a spot, making it unviable for growers. However, the Automotive Tyre Manufacturers Association (ATMA) is of the view that the sector has immense potential for growth and rubber deserves to be placed in the priority sector, with the Centre’s ‘Make in India’ initiative.

Raghupati Singhania, Chairman, ATMA, says that India’s rich rubber value chain comprising one million planters and well spread-out and established tyre and rubber industries can contribute significantly to the economy if an enabling policy framework is in place for rubber consuming and producing interests. He was responding to a questionnaire sent by BusinessLine.

Edited excerpts:

The tyre industry is blamed for suppressing natural rubber prices through large scale imports?

It is not true. Notwithstanding the alleged high volume of imports, the fact that the domestic prices have continued to rule much higher than international prices throughout the year indicates that imports are imperative to bridge the widening gap between domestic rubber availability and its growing consumption.

During the current fiscal, domestic consumption is poised to overtake the figure of one million tonnes, while production is likely to be less than seven lakh tonnes. So, there is a huge gap which can be bridged only through imports.

The quality of domestic rubber is another issue that the tyre industry has to contend with. The auto industry and motorists have come to expect a lot from tyres.

The tyre industry has also taken a great leap forward in terms of manufacturing technologically superior tyres, especially new generation truck and bus radials which require high quality of rubber as a critical raw material. The quality of rubber, therefore, is paramount.

But planters have put the blame squarely on the industry?

There is a perception that the tyre sector is against the interests of the plantation sector. That’s entirely untrue and highly unfortunate.

The tyre industry is all for a vibrant and healthy plantation sector. From time to time, the industry has proved its commitment to a healthy domestic plantation sector and has participated enthusiastically in the rubber quality improvement programme of the Rubber Board.

In an unprecedented move, unheard of anywhere in the world, tyre companies in India came forward to help planters by domestically sourcing rubber at prices much higher than that of rubber available internationally at the behest of the Kerala Chief Minister.

The Chief Minister has gone on record appreciating this gesture of the tyre industry.

I believe the misconception that the tyre industry is against planters’ interest should now be laid to rest once and for all. Both are, and will continue to be, inter-dependent.

But there are reports that tyre companies are now staying away from domestic procurement of rubber?

Yes, of late, there has been a drop in daily buying of sheet rubber and that is due to a slowdown in demand for tyres. The recovery in truck and bus tyre segment which accounts for majority of sheet rubber usage is not along expected lines.

Also, cheaply imported tyres have been meeting a significant part of tyre demand leading to less pick up of sheet rubber by the domestic tyre industry.

Ever since the domestic rubber sourcing has become operational, the industry has bought over 35,000 tonnes of sheet rubber (RSS-4) which compares favourably with the figures for the corresponding period in the previous year. 

Linked to this is the concern expressed by the Chief Minister and media reports that the intended benefit of domestic buying is not being passed on to the growers. Growers have been getting much less than what the industry has been paying.

We will urge the Kerala government to plug the loopholes in the system so that intended benefit could be passed on to the growers.

But bringing down duties would have opened floodgates of rubber imports which planters are contesting?

Inverted duty could also have been corrected by increasing import duties on tyres and bringing it at a par with natural rubber.

Currently, amongst major rubber and tyre producing countries, India levies one of the highest duties on import of rubber and one of the lowest on tyres and other finished rubber products.

Import duty on rubber is 20 per cent while tyres can be imported at a rate of 5 per cent or even at nil rate of duty under various trade agreements.

If the rationale is to have value addition taking place within the country, the duty on import of finished products should be as much, if not more, than that on raw materials.

India’s trade agreements, however, encourage import of finished rubber goods and that has led to a barrage of imports of cheap tyres.

What has been the volume of tyre imports to India?

Notwithstanding the domestic tyre manufacturing capacities and proven capabilities, a significant demand is being met by imports.

For instance, new capacities in truck and bus radials have been created by Indian tyre manufacturers at an outlay of over ₹15,000 crore in the last couple of years.

However, the industry is beset with lower capacity utilisation and low capital productivity in view of surging imports of undervalued and dumped tyres. The tyre industry being highly capital and labour-intensive, imports are not only threatening to make new investments in capacities idle but also cause loss of employment.

In case of the truck and bus radial segment, imported tyres have come to account for over 30 per cent of the total domestic market.

This is causing huge injury to domestic tyre manufacturers who have put up significant capacity in modern radial truck and bus tyre plants and are facing the brunt of the continuing slowdown in demand from the domestic commercial vehicle segment for the last 2-3 years.

What then is the way forward for the rubber sector?

There is an attempt to deflect the debate on real issues as far as the rubber sector is concerned.

The rubber sector should not be brought down to the level of pitting producing interests against consuming interests. The potential of the entire value chain needs to be objectively assessed and optimised.

Plantation sector has its own issues, so does the manufacturing sector. The tyre industry needs rubber – qualitatively much better rubber and at internationally competitive prices – since it has to compete with other countries where quality rubber is available at lower prices.

Similarly, no one can oppose competitive returns for the planters but that should not be at the cost of weakening the manufacturing industry as there is a suggestion to increase import duty on rubber or restricting rubber imports on one pretext or another.

The government should come forward to device ways and means of strengthening the plantations sector through support for new methods, practices and processes and quality improvement exercise, etc so that the plantation sector is better equipped to face the downturn.

(This article was published on March 9, 2015) 

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State Seeks Special Assistance for Rubber Growers

ThirUVANANTHAPURAM: The state has made a forceful plea in front of the Parliamentary Standing Committee on Commerce to recommend to the Centre for releasing a special assistance from the Commodities Price Stabilisation Fund to rubber growers in the country, in view of the crisis attendant to non-remunerative prices for the produce.

Chief Minister Oommen Chandy and Finance Minister K M Mani presented the piquant situation in which Kerala has fallen into with  the state economy itself taking its toll after the prices declined and a sizeable section of  the growers have quit tapping rubber trees in their holdings.

The Fund was constituted with contributions from farmers also, and currently it boasts of a corpus of more than Rs 1,000 crore, it was pointed out when the parliamentary panel met them the other day.

Though a mechanism was arrived at with natural rubber consuming industries, rubber dealers and organisations representing other stake holders at the instance of the State Government, it is yet to make a quantum impact as industries are lifting stocks from the domestic market only on a meager scale. Domestic consignments are currently a buffer for consuming industries to make up for their inventory, which is heavily banking on NR imports. Chandy and Mani has called for a paradigm shift in the Centre’s policy on natural rubber, with stress on regulated NR imports and measures to increase domestic consumption, to alter the scenario and rescue growers and the state economy.

The quality factor which the industries are insisting very much now for paying the better price in accordance with the agreement reached with the government in last December has turned out to be taxing for growers, as more than half of the total produce comprises of  the RSS-5 and ungraded rubber, eventually leading to a huge price difference with the highest RSS-4 grade.

Tyre companies have gone in for massive radialisation in recent years, which necessitates high quality RSS-4 grade rubber and other inputs. While RSS-4 was quoted Rs 140/kilo in the domestic market today, RSS-5 and ungraded fetched only Rs 110 and Rs 103 respectively. With exemption from paying VAT till March 31, tyre majors had agreed to lift stocks from the domestic market at a cost 20 per cent above the daily Bangkok rate for RSS-3 grade rubber.

The understanding was to transfer the import levy component of 20 per cent as add on for NR domestic off take, and promote a win-win situation for farmers and consuming industries alike even when the state loses its purchase tax share.

The 11-member Parliamentary Standing Committee led by Chandan Mitra, had Rajya Sabha members Vayalar Ravi and Joy Abraham from Kerala in it.

 

 

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Rubber industries oppose hike in import duty 

 Kochi, February 16:  

End users of rubber, mainly industries, have objected to demands for increasing import duty on natural rubber further, saying the contention that imports are dampening domestic production has no merit.

The surge in imports has been just a fraction of the actual drop in domestic rubber production, said the consuming industry, referring to the latest Rubber Board data.

Rajiv Budhraja, Director-General, Automotive Tyre Manufacturers Association (ATMA), said the gap between domestic production and consumption has widened to 2,76,065 tonnes in the first 10 months of the current fiscal. Against contraction in domestic production of one lakh tonnes in the first 10 months of the current fiscal, imports have gone up by just 45,000 tonnes, he said.

Rubber consumption has picked up 3.8 per cent in the first 10 months. Against the backdrop of the “Make in India” campaign, the industry should be allowed access to cheaper raw materials to enable value additions. This will help increase rubber manufacturing on account of India’s potential, Mohinder Gupta, President, All-India Rubber Industries Association (AIRIA), said.

Citing the Rubber Board’s projections in respect of production, the consuming industries said the difference between projected and actual production is a staggering 2,46,000 tonnes during the first 10 months of the current fiscal.

(This article was published on February 16, 2015)

 

 

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Malaysia’s Natural Rubber Exports In Dec 2014 Fall 16.7 Per Cent

 

KUALA LUMPUR, Feb 12 (Bernama) — Malaysia’s (NR) exports in December 2014 dropped by 16.7 per cent to 69,438 tonnes from December 2013, the Statistics Department said.

In a statement today, the department said Standard Malaysian Rubber () contributed 95.5 per cent of the total NR exports.

The commodity was exported mainly to (48.3 per cent) followed by Germany (9.7 per cent), US (five per cent), (12.9 per cent), South Korea (2.1 per cent), Brazil (1.6 per cent), Turkey (1.7 per cent), (1.7 per cent) and (1.7 per cent), it said.

Imports of NR in December 2014 fell by 27.1 per cent to 85,193 tonnes compared to a year ago.

Production of NR shrank 32 Panerai Replica Uhren per cent in December 2014 to 52,004 tonnes.

NR stocks decreased 17.8 per cent to 137,990 tonnes when compared to the level in December 2013.

— BERNAMA

 

 

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India: Tyre cos seek hike in import duty

 

 has asked for increasing import duties on  to bring them at par with, the principal raw material so as to provide a level playing field to the domesticmanufacturing.

In its pre-budget submission, Automotive